The cyber risks for self-licensed advice firms
As concerns regarding cyber crime grow, a consultant has shared her doubts regarding whether self-licensed financial advice practices are prepared to mitigate the risks of adopting new advice technologies.
The financial advice profession is seeing an array of transformations and upgrades in the advice software space as platforms look to harness the efficiencies of artificial intelligence (AI).
Both Iress and Netwealth are looking to optimise AI in their advice offerings to better support financial advisers in 2024, and remain at the forefront of technological developments.
However, Jaimie Ramsey, founder and principal consultant at Advice Business Consulting, has cautioned small advice practices and self-licensed firms to ensure they are not distracted by the next “shiny new thing”.
“I think the trap some [advisers] could fall into is ‘what’s the next bright shiny new thing’? Is the investment of money in new technology actually a safe investment?” she told Money Management.
“Licensees are looking at technology differently because of the rising incidence of cyber crime. They’re looking at not only how things integrate, but what’s a safe way for that to happen.”
While larger advice licensees have additional IT support and compliance teams to evaluate taking on new software, Ramsey expressed her concern for self-licensed businesses which might not have that safety net.
She continued: “They might not have the resources or the experience to actually assess their technology to a point that they’re not placing themselves or their clients at risk.
“All this new technology is fantastic, but is it all safe and is it going to put the business at risk? I’m just not sure practices are fully equipped to deal with that.”
With the financial services industry being 300 times more likely to experience a cyber attack, advice firms have been previously urged to consider the volume of client information they hold and how it can be safeguarded.
Ramsey also encouraged advisers to further utilise the existing technology they already use and the additional features they might not know about.
“Most people have Microsoft suite – there’s a lot of [functions] in there that people just aren’t aware of and aren’t using to its full capacity and everyone’s paying for it. What do you already have and do you know all the things that it can do? That process needs to be undertaken before [advisers] look at something different.
“[Advice firms] just need to be wary and careful about what software they’re looking at and make sure that their due diligence is really robust.”
Robert Rich, director and financial adviser at Unite Wealth, also weighed up the pros and cons of implementing new advice technologies as a smaller firm.
“Anecdotally, advisers are asking each other: ‘What [software] are you using? How good is it at actually improving things? Or is it just new software for the sake of having new software?
“I’m being mindful about technology integration and making sure that it’s actually providing a tangible benefit to the business and not just something that you just pay hundreds of dollars that does nothing,” he told Money Management.
AUTHOR
Jasmine Siljic
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